Health Care Consumerism - Readiness Test

 by Ronald E. Bachman FSA,. MAAA, President & CEO, Health Care Visions, Inc.

Introduction

Corporate benefits managers and human resource executives are searching for ways to effectively design health plans to lower costs and improve quality of care. Wellness and prevention initiatives are being adopted. Disease and condition management programs are identifying chronically ill populations.  Education, communication, and incentives are being used to support information on healthy lifestyles and healthy choices. But, health care costs continue to rise. Real change in cost and quality is not about more management, additional programs, limiting formularies, or cost shifting. Real change involves engagement, personal responsibility, and changing behaviors.  

The latest efforts to change behaviors and control cost increases is the adoption of consumer-driven health care plan (CDHP) designs. In limited forms, CDHPs are high deductible insurance plans with attached savings accounts.  CDHPs have shown some promise, but many employers are hesitant to adopt CDHPs as their only coverage option.  Employees are often sceptical of CDHPs. Employees are concerned about the potential for further cost shifting to them and the complexity of understanding health care options.  

Beyond CDHPs to Health Care Consumerism

Health Care Consumerism is a more inclusive concept for engaging plan members. Health Care consumerism is about transforming an employer’s health benefit plan into one that puts economic purchasing power—and decision-making—in the hands of participants. It’s about supplying the information and decision support tools they need, along with financial incentives, rewards, and other benefits that encourage personal involvement in altering health and health care purchasing behaviors.

Health Care Consumerism is independent of plan design. Health Care Consumerism includes opportunities to accumulate funds through “shared-savings”. That is, plan members can be financially rewarded for doing the right activities that improve their health and save money. We are typically American. We want to be paid to do the right things. Good health is not enough. We still have smokers and Type II diabetes is an epidemic. Rewards can include activities such as, participation in a wellness assessment, compliance with a condition management program (e.g. taking medications, diet, exercise, office visits), and maintenance of good health characteristics (e.g. blood pressure, cholesterol, nicotine use, body mass index).  

Engaging plan members in health and health care is a tough road to travel. Some companies seem to do better at it than others.  A comparison of two companies with identical characteristics can have dramatically different health care costs. In the example below, plan costs are shown with identical age, same gender, same tenure, same number of diagnoses, and some co-morbidities, and same region of the country. Company #2 had 84% higher per member health care costs ($4,981 versu$2,705) than did Company #1.   Surprisingly, the reason is not directly related to health care. The difference is how human capital is engaged throughout the organization.

* From HCMS, Inc.

Health Care consumerism embodies an attitude and an approach for how employees view themselves and how plan members are treated broadly by the employer. Developing personal responsibility and ownership for health and health care can not exist in isolation from the overall corporate culture. Utilization differences and maintenance of health is a reflection of the overall development of an organization’s human capital.

Corporate Human Capital

Traditional human capital is a purely financial and economic description of an employee’s worth or value to a company. It is generally used with a top-down management view of the economics of its hired staff. The “Health as Human Capital Foundation” defines human capital is a function of three major personal assets offered by each individual:

(1) Skill – the education and experiences,

(2) Motivation – attitudes and values, and

(3) Health – physical and mental capacity. 

This profiling of human capital structures the economic value of each employee and the pay for services provided by the staff.  

The interplay of health and health care to remain optimally healthy is a critical connection between corporate productivity interests and personal interests. Benefit managers need to better understand this relationship in their organizations to design and offer benefits that maximize their investment in health and health care.  If individuals can not maintain their health, their economic value to the corporation declines. If corporations do not assist and support health for their employees (and family members) they will not receive the optimum productive value from their human capital. 

 

Many employees do not make the connection between maintaining health and their performance related pay. Many employers do not relate the impact of the overall corporate environment to staff lifestyle choices, compliance with treatments, and healthy activities of plan members. If personal responsibility is not a part of other aspects of employees’ performance then expecting optimal engagement by employees in health is not realistic.  

 

Promoting “Corporate Humanity”

 

Corporate humanity is the degree to which companies treat employees as rational intelligent individuals. Companies who treat employees with respect and dignity in other areas of benefits and work assignments have lower health care costs. Engaging the intellect, creativity, and knowledge of employees must be a part of the business culture. This is not a white collar or blue collar distinction. Employees of any skill or education level can be participants in idea generations, product and service improvements, and cost effective changes. Health benefit plans are only a part of the overall corporate environment of engaging employees and supporting good choices.

 

Historically employers tried to drive health care purchasing behaviors by shifting costs, increasing deductibles, and implementing higher premium contribution levels. Few corporations have taken the time to develop critical insights into the drivers and needed complementary corporate efforts to support employee behaviors. Four major areas of employee engagement need attention throughout the corporation:

 

1. Shared Rewards - providing employees with something to gain
2. Shared Responsibility – putting employees at risk with something to lose
3. Asset Growth – giving employees something to protect
4. Ownership – allowing employees the freedom to choose

Readiness Test for Health Care Consumerism

 

The following is a scale from HCMCGroup that measures alignment of Human Capital within an organization. The scale can also be used to determine if health care consumerism will be successful. Within each area there are numerous related corporate programs that will test whether implementing health care consumerism is compatible with the corporate environment. Award a point for each yes answer to the question if it applies to the majority of employees.  

 

Shared Rewards (5 Points)

 

1. Are employees eligible for a performance bonus?
2. If employees are eligible for a bonus, do they:
   1. Know exactly how bonuses will be determined? Or,
   2. Know that at lest part of their bonus is based on individual performance?
3.  It is possible to earn bonus or profit sharing that is greater than 10% of total salary?
4. Can employees cash in unused sick leave or paid-time off (PTO) for extra pay?
5. Survey result “Strongly Agree”: At my company, the people who succeed are those who earn it through their achievement.  

Shared Responsibility (5 Points)

 

1. Do employees have a paid-time-off-bank instead of sick leave?
2.  Are employees compensated less than 100% pay during STD?
3. Do most employees have an health plan out-of-pocket maximum of $3000 or higher?
4. Do most employees have a health plan deductible of more than $1500?
5. Survey result “Agree”: I protect my health because it is essential to having a successful career.

Asset Growth (5 Points)

 

1. Do you have a 401(k) available with at least a 3% corporate match?
2. Do you have an HSA or HRA with an annual company deposit of $2000 or more?
3. Do you have tuition reimbursement for educations?
4. Is prevention and wellness covered at 100%
5. Survey result “Very Good/Excellent”: How would you rate your company’s emphasis on skill training.

Ownership (5 Points)

 

1. Do you offer a consumer-driven health care or health care consumerism plan?
2. Do employees have access to support for financial decisions?
3. Do employees have access to decision support for health and health care decisions?
4. Are employees encouraged to make independent decisions work?
5. Survey results “Agree”: My company asks for input about what benefits are important to workers.

Employers know that healthy populations are more productive. Healthy employees will have fewer sick days, increased productivity, improved presenteeism, fewer disabilities, and lower health costs. To create healthy workers, benefits managers have tended to change plan designs, products, and services to better engage employees in plan selection, treatment alternatives, care options, and lifestyle choices.   

 

The Center for Disease Control studies show that 50% of health status is behavioral. To lower these plan costs requires increased individual personal responsibility that is the hallmark of health care consumerism.